The $ 15 minimum wage does not cover the cost of living for many Americans

A $ 15 minimum wage could become a reality in the US

Although millions received a wage increase with a higher national wage floor, it would still be insufficient to pay many workers a “living wage” – the wages that a person or family needs to cover their basic expenses.

This is especially true for families, largely because of the higher living costs, such as day care centers, than single adults.

Even with an increase of $ 15 an hour, a typical family of four could not pay for the basics in any US state, according to a CNBC analysis of cost of living data gathered by researchers at the Massachusetts Institute of Technology . (This example assumes two children and two adults working full time with a minimum wage.)

The data weigh costs such as food, day care, health, housing, transportation and other needs. It does not include revenue from safety net programs for the poor.

Single adults without children would generally do better than families, according to the analysis. But in about half of the states, the cost of living would still eclipse the earnings of workers who pay $ 15 an hour.

The disabilities would generally be greatest for workers in the West and Northeast – in states like California, Hawaii, Massachusetts and New York, as well as in the District of Columbia – where the cost of living and taxes tend to be higher.

“When people are screaming [that a $15 minimum wage] it’s such a radical proposal, what’s radical about it is, frankly, how low it really would be, “said Judy Conti, director of government affairs for the National Employment Law Project, a workers’ advocacy group.

President Joe Biden called for a $ 15 hourly pay floor. House Democrats intend to attach the policy – which would gradually raise wages by 2025 – to a $ 1.9 trillion pandemic aid package.

The Covid pandemic has pushed the concept of a minimum wage into a major relief, as advocates claim that frontline and essential workers (often women and people of color) are underpaid for their work, while putting their health at risk. risk.

Democrats are trying to approve more pandemic aid until mid-March, although the survival of the minimum wage measure is not guaranteed. Biden reportedly told state officials last week that the wage increase was unlikely to survive in the short term, but promised to continue pursuing politics.

A minimum wage of $ 15 would be more than double the current federal standard.

The current national rate – $ 7.25 an hour, or about $ 15,000 a year before taxes for a full-time worker – was established in 2009. It does not increase with the cost of living, so your purchasing power decreased over time.

Many states have adopted a higher pay scale. Some cities and companies did the same.

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But 21 states were using the federal minimum in January this year, according to the Department of Labor. (Some, like Virginia, recently passed laws to increase it.)

The US minimum is less than half of a single adult’s “minimum wage” ($ 15.41 an hour, or about $ 32,000 a year before taxes), according to national data compiled by MIT. It is a third of what a family of four needs to live – about $ 21.50 an hour per parent, or nearly $ 90,000 a year together. And the effects are compounded for single parents.

“People don’t survive on the minimum wage,” said Amy Glasmeier, professor of economic geography and regional planning at MIT, who created a database of regional living wages in 2004 and updates it annually.

Offering items for daily use can be challenging. For example, having a cell phone and broadband Internet access – closely linked to someone’s ability to get and keep a job in the digital age – costs about $ 120 a month, Glasmeier said. This is almost 10% of a low income earner’s budget.

Low-paid workers may need extra jobs to pay their bills and are often unable to save for emergencies or store money to buy goods like a home, Glasmeier said.

And there can be side effects in areas like health, if people consistently buy low-cost processed foods because that’s all they can afford, she said.

The current wage deficit in relation to the cost of living is generally greater for workers in the South and Midwest. There, the cost of living tends to be lower – but so does the minimum payment.

In these areas, a minimum wage of $ 15 would have a greater effect than reducing the difference in minimum wage, the data show.

Obviously, state averages mask the variation at more micro levels.

Workers in suburban and rural areas generally have lower living costs than those in cities, for example – and stand to gain more from a higher national pay scale, Glasmeier said.

Even between metropolitan areas, there are marked differences. In San Francisco and San Jose, California, for example, a family of four would need about $ 130,000 a year ($ 31 an hour) to pay for the basics. In Jackson, Mississippi and Memphis, Tennessee, it is closer to $ 79,000 ($ 19 an hour).

In comparison, in Holmes County, Mississippi, a rural area north of Jackson, the minimum wage for a family is less than $ 17 an hour, according to MIT data.

Regional variations led some to conclude that the federal government should not adopt a uniform national minimum wage.

“To say that a minimum wage of $ 15 an hour is the minimum wage does not make sense,” said Rachel Greszler, an economist at the Heritage Foundation, a conservative think tank.

“In some places, it is actually not enough if you are talking about a salary to support a family,” she said. “In other places, it can be an adequate salary to support a family.”

If Washington decides to raise the wage floor, federal lawmakers must also adjust the minimum wage regionally to the area’s average wage, Greszler said.

However, this approach would suppress wages in certain areas for people of color, who disproportionately earn the minimum wage, said Conti of the National Labor Law Project.

“We don’t want to put any more systemic racism into it,” she said. “This is what would enshrine regional minimum wages at the national level.”

Critics argue that a national wage increase would lead companies to cut jobs due to rising labor costs, potentially outweighing benefits.

About 27 million Americans would receive a salary increase in the middle of the decade and 900,000 would be lifted out of poverty due to a minimum wage of $ 15, according to the Congressional Budget Office. But there would also be 1.4 million fewer jobs because of the policy, CBO predicted.

It would also cause the cost of day care to increase by 21%, on average, or about $ 3,700 for a family with two children, Greszler predicts, offsetting some of the salary gains.

“It would increase the income of some, but it would lose income for others,” said Greszler. “I don’t think these are very good compensations.”

However, some economists contest the Congressional Budget Office’s analysis.

“We believe that the CBO’s assumptions about the scale of job losses are wrong and inadequately inflated in relation to what the leading economics literature would indicate,” according to economists at the Economic Policy Institute, a left-wing think tank.

A meta-analysis by Arindrajit Dube, an economist at the University of Massachusetts Amherst, found employment impact close to zero when examining evidence of several minimum wage increases.

A higher salary would also significantly reduce government spending on programs to support low-income people, such as food stamps, earned income and child tax credits, according to the EPI.